BILLABONG TAKES THE DROP

BILLABONG chief executive Derek O’Neil must be getting sick of currency playing against profits.

On a day when the capital markets copped another caning with the S&P/ASX down 3 per cent and sovereign debt fears escalated in Europe, Billabong shares plummeted 23 per cent to under $4 a pop.

Net profit for the Gold Coast’s largest company dropped by 18.4 per cent to $119 million for FY11 as the global retail slump lingers – while revenue for the period actually rose 13.5 per cent to $1.7 billion.

Profit was adversely impacted by the effect of the strong Aussie dollar against the $USD and the Euro. More specifically, the monthly average AUD exchange rate against the USD and the Euro, which the group applies to translate its monthly results, appreciated significantly over the year.

The result is also blamed on the impact of a weak retail environment in Australia and a number of natural disasters in key territories, including floods in Queensland, earthquakes in New Zealand and the earthquake and subsequent tsunami in Japan.

Reported group earnings before interest, tax, depreciation and amortisation (EBITDA) was $191.9 million - down 24.3 per cent.

In his annual address today, O’Neil said the strategy to build a more robust business model in response to the changing consumer environment is on track.

He says the group anticipates strong underlying growth in the 2011‐12 financial year as the benefits of vertical margins, cost rationalisation and synergies from acquired assets flow through the business.
The company also withdrew profit guidance for FY12 with further retail declines predicted.